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May 7, 2019

New Haven braces for an embarrassment of hotel riches

PHOTO | Natalie Missakian Developer Salvatore opened his boutique Blake in February — the first high-end hotel to open downtown in a decade.
By Natalie Missakian

When Stamford developer Randy Salvatore cut the ribbon on his boutique hotel the Blake in February, he unveiled the first high-end hotel to open downtown since the Ivy-themed Study at Yale debuted a decade ago.

But it likely won’t be the last for a while.

The chic, cosmopolitan hotel at the end of a once-forlorn but now reborn city corner at George and High streets is the first in as many as five new lodging projects that have opened or are in the works in the Elm City.

Later this year, the storied Duncan Hotel on Chapel Street plans to reopen as the Graduate New Haven, part of a university-themed boutique hotel chain that is expanding into college towns across the country.

The hotel will feature 72 rooms, a lobby coffee shop and a restaurant inside the 1917 building that boasts the oldest hand-operated elevator in Connecticut.

Other projects in the Elm City’s hospitality pipeline include a 132-room Hilton Garden Inn at the corner of Elm and Orange streets; a proposed 165-room boutique hotel on the site of the iconic Pirelli building on Sargent Drive; and a potential 100-plus room Choice Hotel for Rt. 34 near Yale New Haven Hospital.

The latter two are still in their early stages but moving forward, those involved in or familiar with the discussions say. Construction on the Hilton project, which will replace the old Webster Bank building at 80 Elm St., is expected to start this year.

Positive momentum

City officials say the same dynamics that sparked a high-end apartment boom in New Haven a few years ago also are behind the recent flurry of activity in the Elm City’s hospitality market.

Major expansions at Yale University and Yale New Haven Hospital, the birth of new high-tech and biotech startups and the city’s growing reputation as a culinary and entertainment destination have created a buzz that is spilling over into the hotel sector, according to acting New Haven Economic Development Director Mike Piscitelli.

“It creates a value of place that many niche or unique brand hotel operators have identified as a market opportunity,” he says.

The latest additions also tap into a national trend toward smaller “boutique” or “lifestyle” hotels, which boast unique architecture, art or eclectic décor. Millennials and baby boomers are increasingly shunning large national chains in a quest for lodging that creates an “experience,” city officials say.

“It’s driving really interesting brands that are pretty distinctive and reflect the flavor of the city,” says Piscitelli.

Officials with Chicago-based AJ Capital Partners, which operates Graduate Hotels, say their company spends up to two years researching “what is special about the destination” before selecting a location for a new hotel.

It typically looks for university-anchored cities with reputations as hotbeds of entrepreneurism and corporate activity, as well as cities that boast substantial hospital systems and offer a range of leisure activities, according to company officials. On all fronts, New Haven fit the bill.

“New Haven is a vibrant and dynamic community, rich with culture, history and traditions,” Tim Ryan, AJ Capital’s senior vice president for acquisitions, explains. “We look forward to welcoming a steady mix of leisure travelers, business travelers and of course visitors in town for campus-related functions.”

Those same qualities piqued Salvatore’s interest in New Haven’s hotel market a few years back, while he was developing the Novella, the luxury Chapel Street apartment project he opened in 2015.

The more time he spent in the Elm City, the more he realized it was ripe for a new luxury hotel.

“I saw that there was a real need, considering the demand generators around here,” he said, referring to the Yale campus and the world-class research hospital on either side of the hotel, respectively.

With limited downtown lodging, traveling executives, conference attendees and others have often turned to hotels in suburban towns for overnight stays, says Ginny Kozlowski, executive director of Visit New Haven and head of the Connecticut Lodging Association.

She said she has also heard from larger companies outside New Haven that their business guests would prefer to stay downtown.

“They don’t necessarily want to stay in a suburban location where they don’t have a place to go and eat and walk around,” Kozlowski says.

NYC meets HVN

Named for Alice Blake, the first woman to graduate from Yale, the Blake houses six stories of guest rooms, each with upscale appointments, large subway-tiled stand-up showers and fully-stocked kitchenettes.

In addition to a restaurant headed by a Michelin-starred chef, amenities include a high-tech fitness center, meeting spaces and a rooftop lounge with a retractable glass roof, which is scheduled to open in June.

The street-level restaurant, bar and adjoining lobby — which Salvatore says was intended to look like “a big living room”— were designed to flow into one another, creating what he envisions to be a social hub.

Although single-night visitors are his target market, Salvatore says the extended-stay model fills a need for guests seeking longer stays, such as visiting professors, contract workers, and family members of hospital patients. Rates vary, but start at around $250 a night.

So far, early signs are good, he said, calling the Blake’s February launch — in the dead of winter and months ahead of Yale’s busy season — the most successful in his five-hotel portfolio. (His RMS Cos. also owns Hartford’s historic Goodwin Hotel and three others in Fairfield County.)

“They all launched well but this one has exceeded the others,” he said during an early April conversation. “This past weekend we had 70 of 108 rooms sold, and for a launch that’s really quick.”

Perhaps not surprisingly, the hotel is booked for Yale’s commencement weekend (May 17-20) and is already taking names for the Class of 2020.

“The demand was there and our product is so unique to the market,” says Salvatore, who declines to say how much he invested in the hotel. “It’s something different. It’s New York coming to New Haven.”

Crowding the market?

With at least four new lodging projects in the pipeline behind the Blake, is there a risk of too many rooms down the road? Possibly, say hotel operators.

“Some of those projects are further along in the pipeline than others, so it’ll be interesting to see if they all get built. I’m not sure if there’s enough demand for that,” says Salvatore. “But the way I look at it, if the supply comes, we’ve got to be better.”

New Haven’s hotel occupancy rate was on par with the national average in 2018, at 66.8 percent, although it’s risen by nearly 9 percent since 2014, according to figures provided by hotel market data firm STR. (Occupancy rises to around 75 percent during peak months.) Over the last five years, the average room rate has risen 18 percent, from $119 in 2014 to $140 last year, the data show.

City officials, however, say the numbers don’t tell the entire story. “A national firm might look at the data and say, ‘Well, that’s just an average market.’ But one of the things this [economic development] team has looked at is the value of a submarket,” Piscitelli said. “If you’re at a conference at Yale, you want to be downtown. If you’re visiting Yale looking for schools, you want to be downtown.”

Developers like Salvatore are betting demand will rise in response to the new inventory, just as it surged when a new crop of luxury downtown apartment buildings went up earlier this decade.

“Previous to those being built, people decided to live in the suburbs because there weren’t enough quality housing options here,” he says. “It’s the same for hotels.”

Longtime hotel operators in the Elm City are keeping an eye on the new competition, but say they are confident each of their hotels fills a distinct need.

“We feel like our place is solid, given where we are [located] and the relationship that we’ve built with the university,” said Study Hotels founder Paul McGowan, who opened the chain’s first hotel, the Study at Yale, on Chapel Street in 2008.

He said the Study carved its own niche 10 years ago by helping guests feel connected to the Ivy League community. Beyond the Yale-themed décor, the hotel offers special programming tied to campus events like commencement and alumni weekends. “It’s worked very well and we’ve got a longstanding reputation in New Haven,” McGowan says.

Meanwhile the Omni, with 306 rooms and 22,000 square feet of meeting space, is targeting “a whole different type of business than these other hotels can even try to go after,” says Director of Sales and Marketing Dana Zimmerman. “We have always had to have a different sell concept than everyone else.”

Zimmerman says the Omni has the ability to handle events of up to 700 people, filling a void in a city that lacks a large conference and convention center.

“Nobody else can do those numbers unless you go to the Trumbull Marriott, and then you’re really outside of New Haven,” Zimmerman says.

The Omni is also upgrading its product, with plans to renovate the mezzanine-level conference space this summer and give guestrooms a refresh in the fall, she adds.

“It’d be silly not to have some slight concern” about the new competition, she acknowledges, noting the industry was dealt a double blow with the loss of Alexion’s headquarters and the Connecticut Open tennis tournament, which was sold this year and relocated to China. “We hope that there’s going to be new business to come along with [the new hotels].”

City officials are optimistic. Visit New Haven’s Kozlowski says the new inventory will better position New Haven to compete for citywide events and conferences — business it has lost in the past to other cities offering more plentiful hotel accommodations.

She adds that the new hotels will also bolster efforts to sell the Elm City as a tourist destination — and not just for daytrippers touring Yale or seeing a show at the Shubert.

She points to the annual Yale Innovation Summit taking place this month, which last year drew 1,000 attendees from more than 60 venture capital firms.

“In the past, they might have driven in for the day [from places like New York],” she says. “Now that we have more product, hopefully we can convince some of those people to stay here longer.”

Contact Natalie Missakian at news@newhavenbiz.com

  

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